Press Clips

What First Republic failure tells us about financial system The 84 branches of First Republic Bank are opening Monday as JP Morgan Chase Bank, according to JP Morgan Chase, which struck a deal with federal regulators to buy up First Republic Bank. First Republic is the third bank to fail this year — and the largest. Here & Now's Scott Tong speaks with Karen Shaw Petrou, co-founder and managing partner of Federal Financial Analytics, an advisory company focused on financial services companies. https://www.wbur.org/hereandnow/2023/05/01/first-republic-bank-chase

Banks, experts call for accountability above all else in Fed's SVB report By  Kyle Campbell When Michael Barr delivers his report on the supervision of Silicon Valley Bank this Friday, banks, analysts, academics and other observers will all be looking for one thing: a full acknowledgement of the Federal Reserve's own failures. The Fed's vice chair for supervision is set to share findings from his six-week review of the Santa Clara, California-based bank's failure last month. Barr has said his report would be "thorough and transparent" and give an "unflinching look" at the central bank's regulatory and supervisory approach to the bank....  Because so much of this information is already in the public record, Barr's report must go beyond a simple blow-by-blow account of this individual bank failure, said Karen Petrou, managing partner of Federal Financial Analytics. Instead, she would like to see evidence that the Fed has had some [...]

Shares of First Republic sink, as banking industry woes flare anew Government officials, regulators and industry executives are scrambling to craft a solution By David J. Lynch, Rachel Siegel and Jeff Stein Shares of First Republic Bank fell sharply Wednesday, continuing an astonishing decline that poses a fresh challenge for the Biden administration and industry regulators. After losing roughly half of their value Tuesday, First Republic’s shares fell by an additional 30 percent Wednesday. San Francisco-based First Republic, which has a wealthy clientele, peaked at $147 per share in early February before the failure in mid-March of two other midsize banks threatened to ignite a wider financial contagion. By late Wednesday morning, its share price had dipped below $5 before rebounding to close at $5.69....“They’re going to have to intervene — I don’t think they can sell it,” said one banking source who was familiar with the ongoing discussions with senior [...]

The long shadow of the 2023 banking crisis By John Heltman The immediate banking crisis of March 2023 has subsided, but what will the consequences be? On this episode of the BankShot podcast, experts explain what they think will happen next....From American Banker, I'm John Heltman, and this is BankShot, a podcast about banks, finance, and the world we live in....Boy, what a couple of weeks. Karen Petrou: It's certainly has been nonstop. I told other people it felt like finals all over again....I mean, this is my fourth banking crisis, because I've been doing this so long. We advised the National Commission on the origins of the S&L crisis, and what were the takeaways from the S&L crisis. Well, they were two things in very broad strokes: the need for rigorous capital requirements and for rapid supervisory intervention. And so you see a lot of it, the causes of [...]

Watch Karen Petrou, FedFin's managing partner, take on the major issues involving the FDIC and recent banking turmoil on an expert panel along with Margaret Tahyar (Davis Polk) after comments by FDIC Vice Chairman Travis Hill at the Bipartisan Policy Center event. Topics of discussion included recent instability in the financial sector, the government's response, and the relevant policy questions going forward. https://www.youtube.com/watch?v=PlWTL-YX_9I

3 major risks still facing banks and why you should care By Karl Evers-Hillstrom The U.S. financial system is still reeling from the collapse of Silicon Valley Bank (SVB) and Signature Bank, the second- and third-largest bank failures in history. Despite the turbulence, regulators and bank executives say they don’t foresee a repeat of the 2008 financial crisis — but they’ve cautioned that the banking sector isn’t out of the woods yet....“There’s clearly continuing market jitters,” said Karen Petrou, managing partner at research firm Federal Financial Analytics. “If there are surprises in earnings, particularly for some of the regional banks where markets are particularly spooked, that could start another run or market reaction.” As banks seek to bolster their deposits, they face heightened competition for cash. Rising interest rates are making bonds, money market funds and other investments a more lucrative place for individuals and businesses to store their money. [...]

Advocates urge agencies to finish — not start over — pay-clawback rule By  Claire Williams Ebrima Santos Sanneh WASHINGTON — Finalizing the Dodd-Frank Act's unfinished executive compensation rule might be a straightforward path to more easily punish the executives of failed banks in the wake of the Silicon Valley Bank and Signature Bank failures, but the regulatory process could be fraught with legal issues...Karen Petrou, managing partner at Federal Financial Analytics, said that the wide range of financial regulators required to approve the final rule, from banking agencies to market cops, has historically made it difficult for the rule to be finalized. Currently the Biden administration has control of all of the agencies except for the NCUA, which still has two of three board seats allocated to Republican members. "Sec.  956 required all the financial regulators to write a single rule," Petrou said in an email. "That proved impossible  not [...]

A month after liquidity shock, how's banks' lending business looking? By Justin Ho It’s been almost a month since the collapse of Silicon Valley Bank. Since then, much of the government’s response has focused on banks’ liquidity: ensuring that other banks have enough cash on hand to pay their depositors. But the turbulence also has the industry concerned about the lending side of the business. And we’re starting to see signs that banks are pulling back on making loans...If lending were to dry up and people can’t get the loans they need, that’d be a disaster for the economy. But Karen Petrou at Federal Financial Analytics said that’s not what’s happening now. For one thing, falling loan volume is also a sign that people just don’t want to borrow at today’s interest rates. “You certainly see that in mortgages, for example, where fewer and fewer people can afford to get [...]

Bank crisis puts money market funds back in the spotlight By Kyle Campbell Deposit flows after a pair of high-profile bank failures last month have renewed a debate about the Federal Reserve's support of money market funds and whether that support harms banks. Between March 8 and March 22, total commercial bank deposits declined by $300 billion, according to Fed data. During that same period, money market funds ticked up $238 billion..."The whole [ON RRP] facility should be unwound," Karen Petrou, managing partner of Federal Financial Analytics, said. "Similarly, the Fed should stop sitting on trillions in bank deposits. It's a huge distortion."Historically, money market funds have increased the availability of credit by purchasing short term corporate loans — known as commercial paper — and Treasury bills, which are government bonds with maturities of less than one year. Funds still engage in this activity, but their ability to earn interest [...]

Signature Bank Insiders Sold $100 Million in Stock During Crypto Surge Sales went largely unnoticed by investors due to securities rules and filing method By Tom McGinty and Ben Foldy Insiders at collapsed Signature Bank SBNY -7.16%decrease; red down pointing triangle sold more than $100 million of shares in the years after the bank pivoted to attract cryptocurrency companies and became a stock-market darling, according to a Wall Street Journal analysis. Sales over the past three years by the bank’s chairman, its former chief executive officer and his successor accounted for about half of the amount sold, according to the Journal’s analysis of company filings. All three served on the board committee tasked with overseeing the bank’s risk profile over the past year...Karen Petrou, managing partner at bank-consulting firm Federal Financial Analytics, said in an interview that someone at the bank should have called for a pause and asked, “‘Do [...]